27
Jul 2021
3

Chaos at Social Security. Sole Traders may have an Outstanding Debt Due to Renewal of Benefits in June

Business Owners, Social Security , , , , , Sabrina L. Williams

Mayhem and more mayham as Social Security realizes the error made last month when processing payments and deductions as some sole traders renewed their right to continue receiving Sole Trader “Unemployment” Benefits whereas others opted out.

The situation is as follows… Around 250.000 business owners chose to continue receiving unemployment benefits whilst trade is still slow due to Covid-19 but many who had been receiving payments decided to discontinue either because business had picked up and they could manage without additional help or because their income forecast for summer trade would exceed the maximum permitted by Social Security to qualify for benefits.

Those who discontinued benefits would instead receive reduced rates on their Social Security contributions from June to September; now, my clients in this situation will remember when I said at the time that since it was possible to apply for continued benefits until August, it is likely Social Security would charge as normal in June and July and wait to see which business owners are still receiving payments and then deduct two months contributions at the end of August as that seemed the most logical course of action. However, this did not happen and surprisingly, Social Security implemented deductions straight away.

This is partly where the problem lies because not only did they apply deductions virtually across the board meaning that many sole traders only paid 10% of their normal monthly contribution even though they had applied to continue receiving payments; but the Mutuas correctly refunded these sole traders a percentage of the Social Security contribution as part of their benefits payment.

What does this mean? Well, not only were the affected sole traders charged 90% less by Social Security but they were also reimbursed part of the contribution by the Mutua (double whammy!) so in many cases, these business owners now owe Social Security a minimum of 250 euros depending on their base rate.

How has this happened? Social Security and the Mutuas are independent entities so the information is not picked up immediately, so Social Security did not have the necessary data to determine who was entitled to the 90% reduced rate in June. Again, this is why at the time I had assumed they would wait until the end of August before applying any deductions as they would have sufficient information by then but they didn’t do that.

The second scenario is that other business owners are owed money by Social Security because they paid the full contribution in June when they should have only paid 10%. In this case, they must request the appropriate refund directly.

The third and final scenario is those sole traders who had been receiving benefits until May but opted not to renew this right correctly paid 10% of their normal contribution in June and will continue receiving discounts until September. In this case, the sole trader neither owes nor is owed anything.

Bottom line… Check your June bank statement to see what Social Security you paid and what you received from the Mutua to verify whether you are one of the affected business owners who now owes Social Security. If you are unsure, please contact me about it. So far Social Security has not released clear information as to how they intend on regulating these payments, but I’m sure they are working on a way to fix this big mistake!

29
Nov 2020
2

Will the Pandemic Restart Conversations about Social Security Contributions?

INSUFFICIENT HELP DURING THE PANDEMIC’S SECOND WAVE: According to information released by ATA (Association for Sole Traders), each

Will the Pandemic Restart Conversations about Social Security Contributions?

Business Owners , , , , , , , Sabrina L. Williams

INSUFFICIENT HELP DURING THE PANDEMIC’S SECOND WAVE: According to information released by ATA (Association for Sole Traders), each day there are 500 small businesses that close doors forever and these business owners as well as those who perhaps continue to struggle amidst the crisis feel that not enough is being done EIGHT MONTHS into the pandemic.

Although I’m sure the government has done and continues to do everything in its power to provide assistant to individuals and business owners alike, if you think about it, the measures in place allow for employees to be placed on furlough and for the business owners to receive a maximum of 661 euros per month, but is this enough? I could not imagine being in the hot seat and being responsible for passing legislation and making the tough decisions to ensure Spain’s stability at this uncertain time, but maybe it is time for further measures to be agreed…

The critics feel it is time to reraise the question about whether it is plausible for sole traders to contribute at Social Security in accordance to their income instead of a standardized rate calculated by the Administration as it is now. At present, the 661 euros per month financial aid is based on a general calculation that has nothing to do with each individual’s standard of life.

What does this mean? Sole Traders contribute each month as per a Base Rate calculated by Social Security, whereas other European countries contribute in accordance to their income. In this current scenario, those who requested financial aid because the government initially shut down their business activity or because of decreased revenue receive monthly benefits based on the Base Rate and not on their income. So, whether your business generates a monthly profit of 500 euros or 10.000 euros, the benefits received are the same.

This method has affected people at the top end of the spectrum because it is not the same to have monthly outgoings of 5.000 euros as opposed to somebody else’s outgoings of 2.000 euros and only receive 661 euros per month as this would not cover their living expenses. If however, they contribute every month according to their real income, their finacial aid could perhaps be calculated on the average over the past 12 months and the monthly benefits received would allow them to cover their expenses in line with their lifestyle.

Contributions based on real income is a double-edged sword. Even I can see the logistical issues with this and I have commented on this many times over the past few years. Sole Trader Associations have raised this problem on numerous occasions and although Social Security has agreed to consider the possibility, nothing has come of it. The only reason I can think of is that they cannot trust business owners to be honest and decare their real income. If the majority were to underdeclare, I believe we could effectively say “adiós” to the Spanish Social Security system as it exists now because there would not be sufficient funds available to cover unemployment, sick pay, not to mention pensions.

In light of the pandemic and how people have been forced to cope over the last eight months with limited resources, I feel it is only logical for this subject to be reopened and discussed in real terms, but I am not optimistic about a positive outcome simply because of the millions that have been spent from the budget this year alone. Yet, it must also be said that if the majority could be responsible and honest in their declarations, there is no reason why this couldn’t be a way forward and it may even encourage thousands more to register their businesses legally without the pressure of a minimum 286-euro monthly contribution before getting a chance to earn for themselves.

29
Nov 2020
0

COVID-19: Lastest Social Security News for Business Owners

These past few days have been quite busy on the business owner front, whether it has been to

COVID-19: Lastest Social Security News for Business Owners

COVID-19 , , , , , , , , Sabrina L. Williams

These past few days have been quite busy on the business owner front, whether it has been to do with Social Security or financial aid authorized by the Spanish Government, but I’m going to give you insights into what has been going on lately.

As you must be aware, Social Security increased monthly contributions on 30th October 2020 as per Royal Decree 28/2018, 28th December that outlined progressive increases from 2019 to 2021 that incorporate obligatory payment of Professional Accidents, Business Closure (Sole Trader Unemployment) and Professional Training which up until that point were voluntary.

Due to the pandemic, the annual increase, that usually takes place in January, was delayed until October. According to statistics, 77% of sole traders contribute the minimum base rate, which means an increase from 283,30 euros per month to 286,15 euros per month. The increase applied varies from approximately 2,84 euros to 12,12 euros depending on age and applicable base rate.

Tomorrow, Monday 30th November 2020, Social Security will implement two important matters in relation to governmental financial aid:

  1. Those who requested a continuance for sole trader financial aid will receive payment and this will extend until 31st January 2021. Depending on your circumstances, you will either receive 472 euros (50% of the base rate) or 661 euros (70% of the base rate). The number of applicants has almost doubled since the last count. In October 256.000 sole traders requested financial aid, however, it would seem that this has risen to around 500.000 beneficiaries.
  2. Those sole traders who requested deferment on their monthly contribution will begin to pay back their debt to Social Security from Monday 30th November 2020. At the start of the pandemic, the Government permitted this option to certain collectives to temporarily alleviate financial pressures by not charging fees for May, June and July, but now it is time to pay back the piper, so the back payments will be added onto the usual monthly contribution (a minimum of 572,30 euros). Statistics do show though that not many business owners requested this form of financial aid.

Although these measures have proved invaluable to those who have been affected economically by this health crisis, there is an outcry from those who feel that not enough is being done. Please take a read of the following article for more information, https://www.canaryadminservices.com/will-the-pandemic-restart-conversations-about-social-security-contributions/

20
Apr 2020
0

COVID-19: State and Canarian Financial Aid for the Self Employed (a must read!)

Over the past few days, there has been more movement regarding financial aid for sole traders and business

COVID-19: State and Canarian Financial Aid for the Self Employed (a must read!)

Business Owners, COVID-19 , , , , , , , , , , Sabrina L. Williams

Over the past few days, there has been more movement regarding financial aid for sole traders and business owners. Social Security confirms that on Friday 17th April 2020, 919.173 self-employed persons received payment in what is the first outlay of benefits that amounted to approximately 670,9 million euros. On 15th April, the record shows that 1.016.670 business owners have applied for this financial aid, so there are more payments on the way in case you have not received yours yet, but congratulations to all those who have, it must feel like winning the Golden Ticket from a Wonka Bar!

One very important detail that I noticed when I received the first notification that a client’s application had been approved was that it only confirmed payment of 661,08 euros. The Central Government stated in Royal Decree-Law 8/2020, 17th March that they would pay 70% of the base rate that determines how much Social Security we pay each month, so this amount coincides with that, however, the Canarian Government said it would pay the remaining 30% to all residents of this region. The minimum base rate is 944,40 euros, so where is the missing 283,32 euros?

While I have been reading through legislation and corrections on a daily basis from the Central Government, perhaps I have not been monitoring Canarian legislation quite as closely, but to be fair, they have been pretty quiet about financial measures since announcing they would pay the balance and nothing has been reported on the news either. Also, we (other professionals and I) thought that since the Mutuas have been charged with processing Sole Trader Unemployment Benefits, this would be automatically included once they approved the application, but this has not been the case, so I’ve been investigating the matter further.

The Canarian Government published a decree that has almost gone unnoticed (you’ll find out why in a minute), Decree-Law 4/2020, 2nd April and Article 3 confirms that 11 million euros has been made available to business owners who qualify. Upon reading the decree, the following stood out to me in particular:

1. Financial Aid will cover the missing 30% of the minimum base rate. What is my query here? Well, not everybody pays the minimum rate; some business owners contribute at a higher rate, so I’m not sure if they will be paid as per their contributions or whether it will be limited to the minimum.

2. The decree refers to this financial aid as a “grant” or “subsidy”, terms that are often used to help get new businesses off the ground, but these are not necessarily “free” if you can see what I’m getting at. The Central Government uses the expression “Social Security Benefit”, so it will be interesting to see whether any strings are attached to receiving this payment or not, but it is feasible that it will be done exactly at the President of the Canarian Government announced and I am overthinking the terminology that has been used as in Spanish there are other variations of the word “grant”.

I have contacted the Canarian Government to verify the procedure to obtaining the missing 30% since it has not been automatically added to the payments received. The response I have received so far confirms that although the Decree was authorized, additional steps such as how to apply for this financial aid, conditions etc have not yet been approved, but the Canarian Government hopes to publish terms and procedure next week (not guaranteed). I am still awaiting a response with regards to my concerns, but I imagine we will have to wait until a new decree is published to find out so watch this space.

For those whose application has been accepted, you are exempt from paying Social Security contributions until the State of Emergency comes to an end. However, the Administration still has the right to verify that you qualify for these benefits, so they may require additional paperwork to confirm, but to date, 97,3% of all applications have been approved without incident.

There is still one very important issue to discuss… what about Social Security contributions that were charged on the 31st March? Social Security did not implement measures prior to this date, which meant that everyone was charged a full month’s contribution, even who have had to close doors since 15th March. As mentioned in the previous paragraph, business owners in this situation are exempt. A tweet from their official account says that the contribution will be refunded without the need to apply, and further investigation indicates this will happen in the second half of May.

INTERESTING STATISTICS:

The retail sector has filed the majority of all applications (123.883) followed by the hospitality industry (112.854) and construction (68.560)

The worst affected autonomous regions are Andalucía, Cataluña and the Comunidad Valenciana.

23
Jan 2019
0

Amendments to Social Security Contributions for Sole-Traders in 2019

Business Owners , , , , , , , , Sabrina L. Williams

Every year we expect changes regarding Social Security Contributions and general procedures and this year is no exception. There have been many delays on this subject because a number of new measures were supposed to be introduced but it looks as though these may be delayed a few months so that Social Security Delegations can learn how to implement these new procedures, and another issue is as usual, the State Budget was not published on time and was only made available on the 14th January 2019.

1 2